The economy and stock markets continue to be impacted by the global financial situation. This includes markets in the U.S. where economic reports do not make for good reading. At present, most markets are preparing for another rise in interest rates as central banks seek to control inflation.
Mike Loukas, CEO of TrueMark Investments (former President and CEO of USA Mutuals), provides some intriguing thoughts on where markets go and what is driving market moves to Digital Journal.
Loukas says that much of the current situation goes back to what happened and the actions taken coming out of the pandemic.
According to Loukas: “The basic premise is that things weren’t as good as they seemed coming out of the pandemic. There was pent up demand due to lockdown fatigue, government stimulus, etc, but there were also underlying concerns such as festering staffing shortages, supply chain issues, inflation and re-expansion of overhead.”
However, there is another way to consider things, says Loukas. He notes: “Conversely, things aren’t as bad as they may seem right now. Inflation is still problematic, but the Fed is slowly but surely moving away from various types of stimulus (low rates, debt purchases).”
What is important is how businesses have reacted and how they have interpreted the signals. Loukas says: “Companies have had a chance to lower expectations and guidance, allowing the optics of earnings season to create more positive momentum.”
Loukas adds in the context of the market pendulum swinging from one extreme to the other: “The next stage will be finding more of a reasonable middle ground. One where corporate performance should matter more.”
This bodes well for many industries, but especially technology. This sector took the brunt of the correction, yet still includes the best secular growth stories an investor can find.
Here Loukas finds: “Macro headwinds have created right-sized expectations for these companies and the catalysts of their secular growth and accelerating fundamentals aren’t going anywhere anytime soon.”
What companies need to focus on is: “Cloud migration, global digitalization, artificial intelligence: these aren’t just pandemic themes, and now many of the best companies in those segments have surfaced from the correction with attractive entry points.”
A well-planned digital transformation program can help to streamline operations and enhance customer service. A solid strategy can also increase employee efficiency while reducing overhead costs.
